Bob Rivinius, president and CEO of the California Building Industry Association, said the new FHA credit monetization program "should provide a great combination" with the California credit. Some first-time purchasers using FHA loans could even qualify for what he called "a trifecta": They could buy their new house and claim the 10 percent state credit. On top of that they could file for the $8,000 federal tax credit, and then turn the federal credit into instant cash for use on a down payment or for closing costs.
Rivinius said funding for the state tax credit is being depleted fast, but legislation is now pending in Sacramento that would add another $200 million -- and that "should allow buyers to receive credits" through the end of the year. The federal $8,000 credit only covers purchases closed by Nov. 30. Unless Congress extends the credit, it will disappear Dec. 1.
The new bridge loans and cash advance features of the federal credit may not be available immediately through private lenders, say mortgage industry leaders. Among the key questions yet to be answered: Where will non-depository mortgage companies get the $8,000 in advance money to provide upfront to buyers? Although most major banks offer second mortgage programs, the FHA guidelines stipulate that the tax credit advances cannot be secured by a lien on the property, but only by the tax credit to be received by the purchaser.
Many mortgage companies, which do not have banking deposits to tap, will need a few weeks to prepare documentation for what will essentially be secured personal loans. Plus they'll need to locate a source of funds for their advances. In the meantime, however, would-be buyers who believe they are eligible for the federal credit shouldn't sit around. They should shift into high gear shopping for a house -- the Cinderella date of Nov. 30 is looming -- even if they'll need a bridge loan or cash advance to complete the deal.
The odds are good that by the time they're ready to get a mortgage and go to closing, at least some local FHA-approved lenders will be actively in the market with bridge loans.